SMEs form the backbone of the UAE’s economy. They have demonstrated to be the strategic drivers of the industrial sector across the nation and are said to play a more influential role in the years to come. According to the UAE's Ministry of Economy, more than 94% of the businesses operating in the United Arab Emirates are SMEs and together, they account for more than 86 percent of the total private-sector workforce as well as more than 60% of the nation's current GDP, which is expected to go up to 70% by 2021.
The government of the UAE is playing a key role in its ambition to improve their contribution and performance of the Small and Medium sector, and are building various initiatives and programs to help them grow further.
Small and Medium Enterprises in the UAE
Small and medium enterprises (SMEs) are the 'engine' for economic growth and an important contributor to the economy's GDP. They are a primary source of innovation, entrepreneurship, and employment creation.
An SME in the UAE is defined as any enterprise which meets the thresholds of 'Employee Headcount' AND 'Turnover' as applicable to the Segment it belongs to (i.e., Trading, Manufacturing, or Services). The classification of Enterprise Size (Micro, Small, and Medium), is based on unique thresholds for each Segment.
Here's how we can divide the SMEs
Mainly, these SMEs contribute to growth, innovation, and job creation. Therefore, it is imperative to ensure they are empowered with the right tools and support to move ahead into their journeys. The UAE government is playing a pivotal role in its ambition to enhance their contribution and performance of the SME sector. The government has established various initiatives and programs to help them grow further.
But there are a few factors that are creating obstacles in the growth of the SMEs.
Challenges Faced by the SMEs in the UAE
1. Finance Issues
Finance is an essential component for the development as well as running smooth operations of any company. The availability of financing for businesses is a need that UAE should meet to ensure the growth of SMEs and to benefit from them entirely. Banks are also reluctant to provide funds to new businesses as the risk of high failure.
2. Lack of Management Skills
Another factor that acts as an obstacle to the SMEs' growth is the lack of management skills of the entrepreneurs. As the businesses grow in size, a broad skill set is required to manage the operations and the employees. Many managers specialize in a particular field but don't have the full range of skills.
3. Ineffective Business Links
SMEs act as pillars and foundations for the growing economy like a house is built on the pillars; similarly, an economy can prosper and flourish if there is a strong base of SMEs in the country. However, the challenge which the UAE faces in setting this base is poor connectivity and networking. The businesses are not tightly knitted and connected, which could support the new and upcoming SMEs. Thus, hampering the overall process of SMEs development.
Initiatives are taken by the UAE for the SME Sector
The UAE government is playing a pivotal role in its ambition to enhance their contribution and performance of the SME sector, and we have seen the government establishing various initiatives and programs to help them grow further.
Institutions such as the Khalifa Fund, StartAD, and SME Dubai work with local partners and some international ones to help make the UAE a center for entrepreneurship. These initiatives offer business programs, business workspace, and suggestions for funding.
There are many local entities such as the Mohammad Bin Rashid Establishment for SME development, the Khalifa Fund for Enterprise Development, The Saud Bin Saqr Establishment for SMEs, and Ruwad – Sharjah Entrepreneurship Foundation among others.
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